Business Directories

Whitbread sees more competition in 2013

London, February 26, 2013

Whitbread, Britain's biggest hotel and coffee shop operator, said it was preparing for more competitive markets in 2013 as two of its big rivals, Travelodge and Starbucks, shake off recent setbacks.

The company said it would meet annual profit forecasts even though heavy snow in January had slowed like-for-like sales growth in its fourth quarter to 2.7 percent, hitting its restaurant business in particular. That was down from a rise of 3.3 percent across the group in the third quarter.

Whitbread has performed strongly through the economic turndown as customers trade down to its more affordable Premier Inn hotel rooms and flock to its ever-expanding Costa Coffee houses. Total sales rose 14.8 percent in the 50 weeks to Feb 14.

By contrast coffee rival Starbucks has struggled to overcome allegations of tax avoidance which emerged in October and Travelodge, the UK's No.2 budget hotel firm, had difficulty finding cash for much-needed refurbishment.

Both are now overcoming those problems and Travelodge has embarked on major advertising and expansion after restructuring.

"We have been in a relatively benign competitive environment where two of our major competitors have been shooting themselves in the foot, whether it be with an over-aggressive financing structure or an over-aggressive tax strategy," Whitbread chief executive Andy Harrison told reporters on Tuesday.

"I am just assuming they will get their houses in order and it would be prudent to assume that will make the market a bit more competitive," he said, adding the change had yet to happen.

Harrison said it would counter competition by concentrating on offering good service to its 21 million monthly customers.

Shares in the FTSE 100-listed firm, which have risen 50 percent in a year, fell 3.6 percent to 2470 pence at 0929 GMT.

Liberum Capital analyst Patrick Coffey said he still expected Whitbread to progress: "Our recent proprietary consumer survey suggests Premier Inn will continue to win share vs. Travelodge. We also continue to see greater upgrades over the next year as Costa delivers growth well ahead of market expectations."

MEAT TRACING SYSTEM

Whitbread, which also runs the Beefeater and Brewers Fayre pub restaurant chains, joined a growing number of firms to be caught up in a horsemeat scandal that is spreading across Europe when it found equine DNA in meat lasagne and beef burgers this month.

On Tuesday it said had found no more contamination, had a new supplier of beef burgers and was planning a new traceability system to track ingredients "from field to fork".

At Costa Coffee, which recently grabbed headlines when 1,700 jobseekers applied for just 8 posts at one of its new British stores, like-for-like sales rose 5.5 percent compared with growth of 7.1 percent in the previous quarter.

Costa has 1,500 UK stores and expects to increase that to 2,000 as part of a push to double its size worldwide to 3,500 stores by 2015/16. As well expansion in China, the firm is currently testing stores in European transport hubs, including Lisbon airport and the Gare de Lyon train station in Paris.

Like-for-like sales at Premier Inn, which has doubled in size in the last decade to over 50,000 rooms and is aiming for at least 65,000 by 2015/16, rose to 2.9 percent in the quarter, improving on a 2.5 percent rise in its third quarter.

Whitbread is on average expected to post annual pretax profit of 351 million pounds ($530 million), according to a Reuters poll. – Reuters